MANILA, Philippines — SC ruling on voting sharesThe Philippine Stock Exchange (PSE) and Philippine Long Distance and Telephone Company (PLDT) are considering whether to file a motion for reconsideration separately or jointly after the Supreme Court (SC) ruled that only voting capital is counted in the computation of foreign ownership.

PSE chairman Jose T. Pardo said the PSE is a party in the case since former PSE president Fracis Ed. Lim was named one of the respondents.

Pardo said he had discussed the issue with PLDT chief finance officer Annabelle Chua during a PSE board meeting. Chua is a director of the PSE, representing PLDT as a shareholder and issuer. “PSE lawyers will discuss with PLDT lawyers whether to file a motion for reconsideration jointly or separately,” Pardo said.

Earlier, the Securities and Exchange Commission said the SC ruling will not affect just PLDT but all other utility companies.

“The minute they come up with a final decision, it will apply to all. They (utilities) should be mindful and do remedial steps to comply,” said SEC chairperson Teresita Herbosa adding that, generally, the SEC gives affected companies a 30-day grace period to meet the terms.

Herbosa said the commission would impose additional disclosure requirements, detailing and breaking down the classes of shares companies have in their respective General Information Sheets filed annually with the SEC.

“We just have to require companies to disclose if their shares are voting or non-voting and then we’ll compute accordingly,” she said. Herbosa said the SEC will not be asking the SC to reconsider its decision since “the Supreme Court is the final arbiter when it comes to interpretation of law.”

The SC earlier directed the SEC to determine if PLDT violated the Constitutional provision that limits foreign ownership of public utilities to 40 percent. However, the SC limited the definition of foreign ownership only to voting shares while the SEC had been computing ownership based on all shares, including non-voting preferred shares.

PLDT said earlier that, if preferred shares are counted as part of its capital, then foreign ownership will account for just 13 percent to 14 percent while Filipino shareholders own 87 percent of its capital.

MANILA, Philippines - Globe Telecom has asked the National Telecommunications Commission (NTC) to cancel or suspend all proceedings or hearings pertaining to the deal between Philippine Long Distance Telephone Co.(PLDT) and Digitel Telecommunications Phils. Inc.’s (Digitel) involving the sale of the Gokongwei Group’s 51-percent stake in Digitel to PLDT.

Globe noted that the Supreme Court last June 28 ruled that PLDT is not a Philippine national but a foreign corporation. “Therefore, PLDT cannot engage in the operation/provisioning of any telecommunications services; much less can PLDT acquire the initial 51.55 percent of the issued and outstanding common stocks (the controlling shares) of co-applicant Digitel in this case and Digitel’s subsidiaries nor can PLDT tender offer for the balance of the controlling shares….” Globe lawyers said, quoting portions of the SC decision in the case filed by Wilson Gamboa against Hong Kong-based First Pacific’s Anthoni Salim and Manuel V. Pangilinan, and PLDT’s Napoleon Nazareno.

The Ayala-led telecommunications company said the NTC cannot ignore, much less defy/disregard, the SC decision of policy in Section 11, Article XII of the Constitution, which, being self-executory, needs no implementing legislation.

It also quoted Article 8 of the Civil Code which states that “judicial decisions applying or interpreting the laws or the Constitution shall form part of the legal system of the Philippines,” adding that all laws of the land are deemed written in every contract.

Globe chief legal counsel Rodolfo Salalima pointed out that the main or pivotal issue in the SC ruling is whether or not PLDT is a Philippine national or, conversely, a foreign corporation, “the latter a fact admitted and uncontradicted by PLDT’s officers Manuel V. Pangilinan and Napoleon L. Nazareno in that Supreme Court case.”

“This issue is also the main, priority or prejudicial issue in the instant case, which issue cannot be re-litigated and re-decided in this case because to do so would be a violation of the doctrines of the rules of court on litis pendentia, splitting a cause of action and/or forum shopping sanctioned by the rules of court and the Supreme Court circulars on the matter,” he said.

Globe emphasized that co-applicant PLDT has no legal capacity/personality and, therefore, PLDT has no cause of action in the case before the NTC because PLDT is not a Philippine national or a public utility/telecommunications company.

“This also shows PLDT’s failure to comply with the “jurisdictional requirements” as to the legal capacity/personality of PLDT, which jurisdictional requirements were only provisionally accepted by the NTC Order,” Salalima said.

He stressed that the NTC can do no better than the Securities and Exchange Commission tasked by the SC to implement its aforesaid PLDT decision. “Thus, the NTC en banc must first convene to discuss the full impact/implications of the Supreme Court decision on the PLDT-Digitel deal subject of the present case,” Salalima added.

He explained that it is necessary to cancel/suspend further proceedings/hearings in the present case since said hearing will be a useless formality and an inutile excursion into futility.

“Otherwise, too, if NTC nonetheless proceed to hear and resolve this case, any affirmative ruling by this commission approving the joint application will be incongruous, ugly and absurd because the NTC as a quasi-judicial body cannot overrule and set aside the Supreme Court decision that PLDT is not a local public utility but a foreign corporation. Applying the said Supreme Court ruling in the instant case, PLDT, thus, is not entitled as a matter of right to buy or acquire the controlling shares of Digitel and the target companies in this case to wit: co-applicant Digitel landline, Digitel Mobile Cellular (Sun) and Digitel Crossing,” Salalima said.

He noted that the SC ruled that the maximum 40-percent foreign equity/capital in a public utility must be based on the total voting shares of any public utility and that PLDT’s second witness, corporate secretary Lourdes Rausa-Chan, on cross-examination confirmed that roughly 60 percent of PLDT’s total voting shares are owned and controlled by foreigners.

He said PLDT cannot legally buy the initial 55.55 percent of the controlling capital or voting shares of Digitel because PLDT is not a Philippine national or a legal domestic public utility but a foreign corporation.

THE SECURITIES and Exchange Commission (SEC) will hold off from imposing stricter limits on foreign ownership of public utilities until the Supreme Court decides on Philippine Long Distance Telephone Co.’s (PLDT) recent appeal, an official said.

Customers make call from Philippine Long Distance Telephone Co. (PLDT) phones inside a shopping mall in Manila on March 11, 2009. The Securities and Exchange Commission plans to defer applying stricter foreign equity caps on PLDT and other public utility operators until the Supreme Court issues a final ruling on the issue. -- AFP
“We will wait for the high court to rule in finality. I believe PLDT may have filed a motion for reconsideration on this,” SEC Commissioner Juanita E. Cueto said in a chance interview on Friday, the deadline for appeals to be filed with the high court.

The dominant telco had indeed filed an appeal that day, PLDT regulatory affairs head Ray C. Espinosa said in a text message, to overturn the court’s June 28 decision that Filipinos must own 60% of PLDT’s voting shares.

The court had decided that the foreign ownership cap set under the Constitution should be reckoned from “voting stock” and not outstanding capital stock. PLDT thus violates the foreign equity cap under this interpretation as non-Filipino stockholders currently account for 64% of the company’s voting shares.

PLDT common shares closed at P2,370 last Friday, 0.34% higher than Thursday’s close of P2,362 apiece.

Mediaquest Holdings, Inc., a unit of the Beneficial Trust Fund of PLDT, has a minority stake in BusinessWorld.

The Office of the Solicitor General (OSG), which represents the Philippine government, for its part sided with the high court on the ruling and merely raised technical issues in its own appeal filed late last week.

“The Office of the Solicitor General...agrees with the Honorable Court’s construction of Section 11, Article XII of the 1987 Constitution,” read a motion and manifestation filed by the Solicitor General on Friday, referring to the provisions that cap foreign ownership of public utilities.
But the OSG argued that the SEC cannot act on the court’s order for it to check on PLDT’s foreign ownership as only its former chairman Fe B. Barin and not the state agency itself was named as a respondent in the case.

“Jurisdiction over the SEC as a party…can only be obtained by impleading the office itself and via service of the Honorable Court’s coercive process on the SEC,” the appeal read.

The OSG clarified, however, that this “procedural defect” should not nullify the “substantive aspect of the decision.”

The state counsel further argued that Wilson P. Gamboa, who filed the original petition in 2007, should have exhausted all administrative remedies before approving the courts.

“Petitioner’s failure to bring these matters to SEC’s attention naturally denied it (SEC) the opportunity to pass upon these matters at the first instance. Thus, the SEC cannot be justly accused of having ‘unlawfully neglected’ to perform its statutory duty,” the OSG said. -- Franz G. de la Fuente, N. R. Melican and KAM

MANILA, Philippines – Businessman Manuel Pangilinan has asked the Supreme Court to reverse its decision on how much local telecommunications behemoth Philippine Long Distance Telephone Company (PLDT) can be owned by foreigners.
In a 50-page motion for reconsideration filed last July 15, Pangilinan claimed that the SC ruling sends a wrong signal to investors planning to put stakes in the Philippines. He warned the high court of the consequences of its redefinition of the term “capital” found in Section 11, Article XII of the 1987 Constitution.
“If the Court does not reconsider, that unwarranted redefinition will have very serious adverse repercussions for the partially nationalized industries affected, the Philippine capital market, the Philippine economy in general and the country as a whole. There will be no telling if and how those severe consequences can be survived,” said Pangilinan.
In a decision last June 28, the high court said the term “capital” refers to common shares, which entitle a holder to participate in the voting for the firm’s directors. The SC clarified that the term “capital” does not refer to the total outstanding capital stocks, which constitute common shares and non-voting shares.
Applying the SC’s definition, this means that PLDT exceeded the maximum 40-percent foreign ownership in public utilities allowable under the Charter because foreigners “unmistakably” control more than 64 percent of the firm’s common shares.
“In other words, foreigners hold 64.27 percent of the total number of PLDT common shares while the Filipinos hold only 35.73 percent. Such amount of control unmistakably exceeds the allowable 40 percent limit on foreign ownership of public utilities expressly mandated in Section 11, Article XII of the Constitution,” the SC decision stated.
Aside from Pangilinan, PLDT President Napoleon Nazareno, and the Philippine Stock Exchange (PSE) filed their separate motions seeking a reversal of the high court’s decision and asked that a temporary restraining order and/or writ of preliminary injunction be issued to stop the SEC from conducting its investigation.
The respondents, in their motions, said that the ruling that foreigners may own up to only 40% of a public utility’s voting stock (instead of up to 40% of its entire capital stock) “is not justified: by the text of the Constitution; the clear intent of the 1986 Constitutional Commission that drafted it; nor by the economic conditions confronting the country.”
The separate motions explained that the high court decision was based on a misreading of Section 11, Article XII of the 1987 Constitution when it ruled that the term “capital” in that section referred only to “voting stock”, thus justifying the reduction of the allowable investments for foreigners in partially nationalized activities from 40% of total “capital” to only 40% of “voting shares” because Section 11 explicitly says “capital” not “voting shares.”
The motion stated that the 1986 Constitutional Commission was comprised of intelligent men and women fluent in English and keen to make their intentions clear. They would not have used the general term “capital” if they wanted to refer only to “voting shares”.
Pangilinan said the reason why the framers of the constitution rejected the use of the term “voting capital” or “controlling interest” instead of “capital” because they are aware of the “dire economic condition and pressing need for investments, and wanted to find ways to attract and keep, rather than drive away foreign capital.”
“This meant they did not want to adopt additional restrictions such as limiting allowable foreign ownership of voting stock to only 40 percent rather than 40 percent of total capital in partially nationalized industries,” Pangilinan averred.
Pangilinan also questioned the high court’s jurisdiction to rule on the petition of lawyer-accountant Wilson Gamboa, who had wanted to annul the sale of government-acquired 111,415 PLDT shares to Hong Kong-based First Pacific Co. Ltd. which is affiliated with Pangilinan. At the time of the transaction, the shares were valued at P25.2 billion and sold by PTIC.
He likewise asserted that the SC had a “clear lack of jurisdiction” in handling Gamboa’s petition which was filed in 2007.
“The 1987 Constitution does not give the Court jurisdiction to entertain petitioner’s declaratory relief application and the [SC] Majority may not get around the constitutional limits to the Court’s jurisdiction and powers by considering that declaratory relief application as a mandamus petition,” the businessman said.
Declaratory relief is a legal remedy where one party asks the court to determine that party’s rights as regards an action between two other parties, as in Gamboa’s petition, the government’s rights in the sale between First Pacific and PTIC. On the other hand, mandamus is a legal remedy for the courts to direct a government body to perform a ministerial duty.
Also in his appeal, Pangilinan said that SEC is not a party to the case because only former SEC chair Fe Barin was impleaded as a respondent.
“Impleading her is not impleading the SEC. The SEC is a collegial commission belonging to the executive branch of government which should itself have been impleaded as the proper public respondent,” Pangilinan said.

MANILA, Philippines - The Supreme Court will hear oral arguments in appeal of its recent decision, changing the calculation of foreign ownership in public utilities.

But it has yet to set the date as it is still awaiting all the pleadings of the parties in the case.

The high court earlier directed the Securities and Exchange Commission (SEC) to study whether telecom giant Philippine Long Distance Telephone Co. (PLDT), a unit of Hong Kong-based First Pacific Co. Ltd., has breached the 40% limit on foreign ownership of public utilities as prescribed under the Constitution.

Section 11, Article XII of the 1987 Constitution states that "no franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum of whose capital is owned by such citizens, nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years."

In assessing "capital," the high court ruled that only voting or common shares could be counted, and preferred or non-voting shares should be excluded.

Pangilinan warned of serious repercussions on the economy. The PSE echoed Pangilinan's view, noting the economy stands to lose more than P630 billion in allowable foreign investments in PSE-listed shares or 9% of the current total market value if it were to follow the SC ruling.

The SEC, for its part, asked the court to abandon the ruling for being "premature."

Gamboa case

The SC ruling stemmed from the complaint filed by human rights lawyer Wilson Gamboa who sought to annul the sale of the government's 46% stake in Philippine Telecommunications Investment Corp. -- representing a 6.4% indirect interest in PLDT -- to First Pacific, which partly owns the telco.

Gamboa stressed that as a consequence of the sale, foreign groups First Pacific and NTT DoCoMo, a PLDT minority stockholder, ended up owning 51.56% of PLDT equity, over and above the maximum allowable 40%.

The SEC said Gamboa failed to exhaust administrative remedies with the securities regulators before bringing up the matter to the court.

MANILA, Philippines - Confronted by the possibility its ruling would cost the Philippines over P630 billion in foreign investments, the Supreme Court (SC) has set for oral argument the appeal of Philippine Long Distance Telephone Co. (PLDT) chairman Manuel V. Pangilinan over its decision last month ordering the review of foreign ownership in the telecommunications company.

SC spokesman Jose Midas Marquez said the magistrates decided during a full-court session yesterday to call for an oral argument in resolving the motions for reconsideration filed by Pangilinan and the Philippine Stock Exchange (PSE) and motions of the Securities and Exchange Commission (SEC) and petitioner lawyer Wilson Gamboa.

Marquez, however, explained that the High Court has yet to set the date for the proceeding as it awaits the submission of all pleading by all parties in the case.

Last July 15, Pangilinan asked the high court to consider the possible repercussions of the ruling to businesses in the country: “If the Court does not reconsider, that unwarranted redefinition will have very serious adverse repercussions for the partially nationalized industries affected, the Philippine capital market, the Philippine economy in general and the country as a whole. There will be no telling if and how those severe consequences can be survived.”

Pangilinan contested SC’s ruling that the 40-percent limit to foreign ownership in local companies covers “capital,” which under Section 11, Article XII of the Constitution refers to shares of stock entitled to vote in the election of directors.

The PLDT chief argued that the 40-percent limit prescribed in the law covers the entire capital stock and not just the voting stocks – contrary to the ruling of the court.

He also cited as another basis the “1986 Constitutional Commission’s repeated rejection of proposals to replace the term ‘capital’ with more restricted and specific terms such as ‘voting capital’ or ‘controlling’ interest’ evinces an unmistakable intention to refer to all types of ‘capital’ and not just to ‘voting shares.”

Pangilinan also argued that the court purportedly usurped the administrative power of the Executive branch when it ordered SEC to review foreign ownership in PLDT. On the technical ground, Pangilinan stressed that the High Court should have instead dismissed the petition of human rights lawyer Wilson Gamboa for lack of jurisdiction since the elements for the mandamus action were not present and also for inherent flaw since PLDT and the SEC were not impleaded in the case.

GLOBE TELECOM, Inc. made its final attempt to block Philippine Long Distance Telephone Co.’s (PLDT) takeover of Digital Telecommunications Philippines, Inc. (Digitel), reiterating its arguments in a closing position paper submitted to a regulator.
"The sale and purchase agreement ... must be denied approval and the joint application dismissed," Globe Telecom said in its final memorandum, a copy of which was sent on Friday by the National Telecommunications Commission to reporters.

Globe Telecom reiterated that PLDT should first prove that it is a Filipino corporation, that PLDT should first address its interconnection with other industry players, and that the acquisition will result in unfair frequency distribution between telcos.

This, as the PLDT is seeking the government’s approval to buy JG Summit Holdings, Inc.’s 51.55% stake in Digitel. The P69.2-billion deal will give PLDT some 70% of the domestic mobile market, leaving Ayala-led Globe Telecom, Inc. to about 30% of the market.

In the event that the NTC should approve the deal, Globe Telecom said that such approval will be granted on the condition that PLDT returns "excess" frequencies for redistribution to other telcos.

PLDT and Digitel should also immediately commence landline interconnection with other networks and enter into a fair internet protocol (IP) peering or interconnection agreement with Globe Telecom, the Ayala-led telco said.

PLDT could not be immediately reached to comment.

The NTC concluded its final hearing on the PLDT-Digitel deal last July 18.

The commission is expected to deliver an en banc decision regarding whether the deal has been approved or not after a thorough review of the acquisition’s legality and its implications on consumers.

Shares of PLDT closed 0.76% or P18 higher at P2,400 per share on Friday, while shares of Globe Telecom closed 0.72% or P7 lower at P959 apiece.

Shares of JG Summit Holdings closed 0.78% or P0.20 higher at P26 apiece on Friday, while shares of Digitel closed 1.32% or P0.02 higher at P1.54 per share.

Mediaquest Holdings, Inc., a subsidiary of the Beneficial Trust Fund of PLDT, has a minority stake in BusinessWorld.

THE PHILIPPINE Long Distance Telephone Co. (PLDT) urged regulators to see through the “vested interests” of parties opposing the firm’s takeover of Digital Telecommunications Philippines, Inc. (Digitel) in its final bid to gain approval for the deal.
The dominant telco, in a final memorandum to the National Telecommunications Commission (NTC) dated July 26, said its plans to acquire 51.55% of Digitel will improve the quality of the two firms’ service to its markets contrary to the “hypocritical” allegations of rival Globe Telecom, Inc.

The statement comes in the aftermath of public hearings PLDT and Digitel owner JG Summit Holdings, Inc. have had to hurdle, causing them to miss their end-July target to finalize the deal after already failing to seal the acquisition on June 30 pending regulatory approvals.

The mega deal, if approved by the government, will cost PLDT P69.2 billion in exchange for control over 70% of the mobile market.

“The cause of public interest should never be exploited to conceal the vested interest of a few,” PLDT said in its final position paper.

Globe Telecom also questioned PLDT’s compliance with laws capping foreign equity in public utilities, saying that the dominant telco must first prove its Filipino ownership before being allowed to buy another Filipino company.

In the event that the NTC should approve the deal, Globe Telecom said that such approval should be subject to the following conditions, among which is the return of “excess” frequencies and the re-distribution of such to other telcos.

‘Hypocritical’

But PLDT, in its final memorandum, retorted that Globe Telecom was blocking the deal when the Ayala-led firm had itself acquired Isla Communications Co., Inc. in the past to allegedly increase the number of its frequency assignments and “dominate the market” for mobile services at the time.

“[And Globe Telecom] has admitted to having placed a bid to buy out Digitel,” PLDT reiterated.

The dominant telco went on to emphasize earlier promises to expand budget offerings of unlimited services at a floor price and also to increase Internet penetration in the Philippines.

PLDT said the deal will result in “increased capability and better positioning” for PLDT and Digitel, so both firms can provide “higher quality” and “more affordable” call, text message and Internet services to its subscribers.

“Digitel subscribers will benefit from PLDT’s extensive infrastructure, particularly its nationwide fiber-optic network and its international cable and satellite facilities,” PLDT added.

“Only those who do not want to improve their network and infuse capital into their business are raising purely speculative concerns,” PLDT said.

The NTC concluded its final hearing on the PLDT-Digitel deal last July 18. The commission is expected to deliver an en banc decision regarding whether the deal has been approved or not after a thorough review of the acquisition’s legality and its implications on consumers.

Shares in PLDT closed 0.76% or P18 higher at P2,400 per share on Friday, while shares in Globe Telecom closed 0.72% or P7 lower at P959 apiece.

Shares in JG Summit Holdings closed 0.78% or P0.20 higher at P26 apiece on Friday, while shares in Digitel closed 1.32% or P0.02 higher at P1.54 per share.

Mediaquest Holdings, Inc., a subsidiary of the Beneficial Trust Fund of PLDT, has a minority stake in BusinessWorld.